Wex Inc. in the 1980s and 90s, under its previous name of Wright Express, established a presence in the payment industry as a fleet card provider, then as a travel card provider and eventually as a virtual card pioneer. In recent years, though, Wex increasingly is finding itself partnering with travel management companies to deliver virtual payment solutions to corporate clients. With virtual payment gaining more industry attention, Wex's footprint is growing as well.
The company, which handles virtual payments globally for large online travel agencies like Expedia, Orbitz and Hotwire, in recent years has partnered with the likes of Adelman Travel Group and Christopherson Business Travel, to provide virtual card solutions for companies including CHG Healthcare and Goodman Networks.
And virtual cards are helping Wex's bottom line. Revenue from Wex Inc.'s Other Payment Solutions business, which includes virtual cards, in the nine months ending Sept. 30 increased $39 million year over year to $180 million. Total revenue for the third quarter also increased to $78 million compared with $55 million for the same quarter last year.
While the Other Payment Solutions business also includes purchases and prepaid cards, revenue primarily is earned from processing payments through Wex's virtual card product, according to documents filed with the U.S. Securities and Exchange Commission.
Wex's virtual card business, which includes travel and other such industries as health, insurance and education payments, in 2013 processed more than $13 billion in volume, of which 90 percent was "true virtual card payments," meaning no plastic was involved, Wex strategic sales manager Mike Werrell told BTN. The remaining 10 percent of volume represented procurement card spend for which a physical plastic card was issued to a corporate accounts payable department.
Payment solution purchase volume in the nine months ending in September alone was at $13.5 billion, up from $9.7 billion from the same period last year, due to increased usage as well as Wex's acquisition of Evolution1, a cloud-based technology and payment solutions firm that caters to the healthcare industry, according to the filing.
Wex (as Wright Express) in 1983 got its start in the fleet card space, and the provider since the mid-'90s has been making strides in the travel card space, particularly with virtual cards. Wex also provides such corporate payment solutions as corporate cards, procurement cards, payroll cards and prepaid cards.
Challenged by paying its disaggregated hotel base, Priceline in 2000 became the first Wex customer to use virtual cards to settle payments directly with hotels on behalf of customers on a per-reservation basis, Werrell explained. Priceline can contact Wex to create a 16-digit MasterCard number—complete with expiration date and three-digit CV2 security code found on the backs of cards—and provide the card details to the hotel for settlement.
"That was the first iteration" of virtual cards, Werrell said. "The products have evolved from that point forward, and it's grown." That said, Werrell noted that virtual payment processing procedures have remained the same.
Wex's focus has been on large OTAs, travel wholesalers and tour operators, but Werrell said that in the past three years it's received more interest in virtual cards from TMCs. "The online travel agency case is an obvious fit because the business model begs for a payment mechanism like a virtual card," he said. "But the TMC case is not always so obvious, and it depends on their commercial clients."
Specifically, he said, virtual payments are particularly relevant for those companies with users, like contractors and interview candidates, who aren't issued corporate cards. Using virtual cards in these cases allows travel managers to avoid using their own p-cards to reserve and pay for hotel rooms, as some tend to do, Werrell said.
Expansion
Wex also has been expanding its reach outside of the United States through acquisitions. In 2010 Wex acquired Australian Assets of Retail Decisions, a fleet and prepaid card provider.
"The acquisition was fleet- and prepaid-related, but it gave us a platform to bring our virtual card product over to Australia and to begin acquiring customers there," Werrell said.
In 2012 Wex acquired U.K.-based CorporatePay, a provider of MasterCard and Visa prepaid virtual cards. CorporatePay this year changed its name to Wex Europe as part of Wex's family of companies.
Wex also is looking into opportunities to white-label its virtual card product with different travel technology companies, financial institutions and TMCs, Werrell said.